- A judge has rejected Genesis and Gemini’s attempt to dismiss its case against the SEC
- SEC alleges the companies offered unregistered securities to retail investors via Gemini Earn
- The ruling pushes the case to court, providing the SEC with another opportunity to substantiate that cryptocurrencies are securities.
The judge overseeing the early stages of the US Securities and Exchange Commission’s (SEC) case against Genesis and Gemini has rejected their attempt to get the case dismissed. The SEC alleges that the companies violated securities laws by offering and selling unregistered securities to retail investors through the Gemini Earn program. The ruling means that the case will now go to court, giving the SEC another chance to prove that cryptocurrencies are securities.
Two Attempts to Dismiss, Two Failures
The SEC sued the two entities in January, claiming that the pair sold securities through the Gemini Earn program, a program run by Gemini using Genesis’ interest-earning platform. Four months later both companies moved to dismiss the SEC’s action for failure to state a claim and requested oral argument.
Four months later again they filed pre-motion letters asking the Court to stay discovery pending resolution of the motions to dismiss, although the court denied this latter point at a conference last October.
SEC Getting More Cracks at the Whip
Gemini Earn, which was introduced to retail customers in February 2021, promised up to 8% interest on cryptocurrency investments and at its peak boasted about 340,000 users with $900 million in assets on the platform.
However, in November 2022, Genesis, the operator of Gemini Earn, halted withdrawals due to liquidity concerns, leading to a dispute between the leadership of Genesis and Gemini which became public very quickly.
In his ruling on the latest dismissal appeal, Judge Edgardo Ramos found that the SEC’s complaint “plausibly alleges” that the two firms violated securities laws through Gemini Earn, which was shuttered in January 2023. The ruling means that the case will now proceed to court, giving the SEC another shot in the arm when it comes to cryptocurrencies being treated as securities.
